Calling Brexit "the event of the year" during his opening speech at the IoD's annual convention, Simon Walker cautioned that the country must now not go back to the "insularity and protectionism" that dominated policies during the 1960s and 1970s.
Instead, Walker called for "an open economy based on free trade and deregulation".
"Will 'industrial policy' involve reskilling those who make bulk steel, so that they can move to sophisticated high tech products where Britain retains a competitive edge?" Walker continued.
"Or will Britain simply block steel imports from China and pour funds into subsidising uncompetitive plants as a method of retaining jobs?
"Down one path lies adapting to change: to thrive by finding new opportunities in the global marketplace. Down the other is stultifying bureaucracy, corporate protectionism and managed industrial decline."
Walker, who joined the IoD five years ago in 2011, will stand down from his role at the end of the year.
Protectionism has been a particularly sensitive topic for the steel industry in recent years, with many pointing towards cheap imports from China as one of the key struggles for the sector in the UK.